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CEO pay and stock buybacks have soared at the largest low-wage corporations

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Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#171

Post by WalterBright »

csours wrote: post #25

I'm not sure how to phrase this, so please be patient and try to understand what I intend to say. CEO pay relative to median employee pay has soared since the 1970s. That is, a CEO may be paid $10,000,000 vs the median employee at $70,000 (arbitrary numbers), where before 1970 the numbers may have been $150,000 and $20,000 Using only one set of numbers can be deceiving though. For instance, through mergers and acquis…

Keep in mind that executive compensation is at the expense of the shareholders, not the workers.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#172

Post by simianwords »

drunner wrote: post #156
simianwords wrote: post #133

Earlier quoted context omitted.

Fair, lets then count income tax which makes it more like $500 assuming net taxes around 40%. I'm ignoring salary increase due to stock valuation going up because it complicates things and there is equal force from both sides of the argument. So you decide: 20,000 companies running with a CEO being paid like an average person. And every citizen gets $500 in their account per year. Edit: its not just a CEO but the C s…

I don't think tax is that high for that income bracket but your point still stands for the rules of the current system. I agree with your sentiment there are way better ways to redistribute wealth. Just dont discount what several hundred bucks means to way too many people in such a prosperous country.

This is the tax bracket for CEO's.

>Just dont discount what several hundred bucks means to way too many people in such a prosperous country.

Sure.. but the real disposable income has increased by a decent amount over the years. Just in the last 10 years (including covid) the real disposable income has increased by over 20%.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#173

Post by LarMachinarum »

whatisthiseven wrote: post #93
simianwords wrote: post #57

Earlier quoted context omitted.

Yeah pretty much.. but this is a good thing. Companies should focus on improving profits and not wages.

Are there studies that show a causal relationship between higher CEO pay and profits? Do buybacks cause profits to increase? Maybe from what I can see? But long-term? If all we care about is short-term then that will lead to the continued financial cannibalization of the US economy. Where private equity firms buy companies and destroy them for short-term profit while loading them with the debt used to buy them. I thi…

> Do buybacks cause profits to increase?

They cause each (remaining) shareholder's part of the profits to increase (relative and absolute), because there are fewer shareholders left. So it does very really increase the value of each share.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#174

Post by ninkendo »

missedthecue wrote: post #80
necubi wrote: post #47

Earlier quoted context omitted.

Buybacks are just a more tax-efficient way to issue dividends to shareholders (dividend issuance is a taxable event and at short-term rates, buybacks raise the stock price and those gains aren't taxable until you sell, at which point it may be long-term cap gains). It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which…

But the buyback involves buying from sellers. Why don't the sellers of the shares owe tax? Don't see how that's a tax-dodge. The fundamental purpose of a buyback is not to raise the stock price. The purpose of a buyback is to reduce the amount of outstanding shares, which makes every existing owner own an increased percentage. If a company buys back 10% of its stock, each long term shareholder now owns 10% more of th…

> The fundamental purpose of a buyback is not to raise the stock price.

Make up whatever nonsense you want about the “fundamental purpose” of something, it doesn’t matter. The purpose of a system is what it does:

https://en.m.wikipedia.org/wiki/The_purpose_of_a_system_is_w...

Stock buybacks increase share price. There’s no reason to look any farther than that. The purpose of stock buybacks is what stock buybacks do.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#175

Post by BobbyTables2 »

I suspect the low tax rate of long term capital gains combined with companies being allowed to do buy-backs drives all of this.

Seems like today they are paid mostly in stock. Their vision becomes very short term. If they can’t organically grow the company, stock buybacks will prop up their shares. Otherwise a CEO paid mainly from salary might be more motivated to stay a tiny bit longer.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#176

Post by Aunche »

danny_codes wrote: post #149
Aunche wrote: post #95

I'd likely be progressive if American progressivism wasn't so economically illiterate (as opposed to say Piketty). The vindictive themes make me think that it's motivated more by envy than a genuine desire to improve society. The CEO to worker compensation ratio is a useless metric. There is absolutely no reason why Starbucks should be punished for hiring more workers over a company like Nvidia that hires relatively…

It’s a metric capturing income inequality. Very relevant to those of us who care about income inequality. There are plenty of reasons to want to limit income inequality.

My point is that it is a useless metric about income inequality. Starbucks can restructure to a franchise model and immediately reduce worker-CEO pay. Like I said, any other form of taxation would be a less economically distortionary way to reduce income inequality.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#177

Post by stickfigure »

shortrounddev2 wrote: post #147
stickfigure wrote: post #108

Earlier quoted context omitted.

As has been pointed out elsewhere, buybacks are morally equivalent to shareholder dividends; the only effective difference is the tax treatment. If you think returning money to investors is bad, I have to ask: Why would anyone invest in the first place?

If the only difference is how much of the profit is socialized vs privatized, then they are not morally equivalent

> how much of the profit is socialized vs privatized

What does that phrase even mean? It's nonsensical. Whether via buybacks or dividends, money goes from the corporation to its investors. That's why investors invest.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#178

Post by derf_ »

missedthecue wrote: post #80
necubi wrote: post #47

Earlier quoted context omitted.

Buybacks are just a more tax-efficient way to issue dividends to shareholders (dividend issuance is a taxable event and at short-term rates, buybacks raise the stock price and those gains aren't taxable until you sell, at which point it may be long-term cap gains). It's reasonable to be upset about the fact that this is arguably a tax dodge! But all of the other criticism of buybacks apply equally to dividends which…

But the buyback involves buying from sellers. Why don't the sellers of the shares owe tax? Don't see how that's a tax-dodge. The fundamental purpose of a buyback is not to raise the stock price. The purpose of a buyback is to reduce the amount of outstanding shares, which makes every existing owner own an increased percentage. If a company buys back 10% of its stock, each long term shareholder now owns 10% more of th…

> Why don't the sellers of the shares owe tax?

They do, but it is only paid by the people who took the money (instead of being forced to do so), and, more importantly, only on the difference from what they paid.

If you pay out $1mln of dividends, then everyone collectively owes (let's say at a qualified rate of 20%) a total of $200k. If you buy 20,000 shares from one guy at $50/share, you returned the same $1mln of cash to shareholders, but if he bought last year for $45, he only owes (let's say at a long-term capital gains rate of 20%) a total of $20k in taxes.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#179

Post by Paul_Clayton »

01HNNWZ0MV43FF wrote: post #65
LordDragonfang wrote: post #46

So perhaps someone can explain something to me. One of the main problems I see with modern Corporatism is that "shareholders" have too much influence over companies, driving them to make choices that erode long-term customer trust and brand value in return for short-term gains. (This is rational from the investor POV, because they can sell their stake at any point and still have made a profit on the dead husk of a co…

I think what I've heard is: The buyback is part of a larger scheme where execs / board members can pump the price of the stock, and then make themselves money either through bonuses tied to rising stock prices, or through dumping their own shares once the market price goes up. https://en.wikipedia.org/wiki/Share_repurchase#Criticism The vibe is that there's a vicious cycle of "Customers are not brand-loyal, let's mak…

Even personal recommendations have the problem of requiring significant use time (c. a year?) to estimate value. A company can (it seems) degrade quality for a model faster than quality can be evaluated by normal use.

Re: CEO pay and stock buybacks have soared at the largest low-wage corporations

#180

Post by simoncion »

missedthecue wrote: post #105
simoncion wrote: post #82

Earlier quoted context omitted.

So, I'm not sure what your claim is. Is it something like "bonus pay is totally incomparable to regular wage pay and does not enter your bank account"? That's the most charitable interpretation I can make out of > ...awarding him a pile of [RSUs] if he hits certain metrics is not pay, is not comparable to W2 income, does not hit his bank account...

Performance pay that requires you to hit multiple metrics over a number of years, metrics you may or may not hit, due to unpredictable factors within and outside of your control, is not comparable to guaranteed wage income in a single year. That's my point. Their CEO has a W-2 salary and cash bonus. It is about $5m a year. They should use that. We all know the reason they pull forward the next 3 years of maybe money…

> is not comparable to guaranteed wage income...

Funnily enough, wage income for nearly all USians is not guaranteed. For most of us, you have to keep hitting performance targets to earn subsequent paychecks. Sometimes (as many of us in the tech sector, and so, so many in the movie and video games sector know) you get that income taken away from you for no real reason at all.

> ...in a single year.

(To keep things simple in the following, I'm going to assume that Starbucks' fiscal years line up with calendar years, even though I'm certain that they do not.)

Sure, that objection of yours I sort of agree with. He gets a ten million signing bonus [0] and ~30 million in stock just for signing up, with ~45 million in additional stock gated behind continued job performance. The guy only starts getting 10.8 million per year (through the LTIP) in FY2025, with an equity bonus of 13.8 million and a cash bonus with target value of 3.6 million and maximum-planned value of 7.2 million.

Having said that, it does look like the annual cash bonus starts immediately:

> Your annual cash bonus for FY2024 will be pro-rated based on your Start Date and, notwithstanding anything to the contrary in the foregoing, will be calculated by multiplying (i) the annual cash bonus due based on actual performance for FY2024 by (ii) a fraction, (A) the numerator of which is the number of calendar days from the Start Date through September 30, 2024, and (B) the denominator of which is 366.

Another thing that's very important to look into: How often do these CEOs fail to meet their cash bonus targets? Their stock bonus targets? When I was working a bonus-eligible job, the only people who didn't meet their cash bonus target were folks who were going to be fired soon. (Noone I knew was eligible for bonuses delivered via RSUs.)

If we assume that he's not eligible for stock bonus in 2024, and we assume that his late start only divides his 2024 earnings by four, then (if I haven't fucked up my math) it looks like his Q4 2024 earnings were 41.3 million dollars. That's a little less than half what that article reported, but

a) That's still a lot of money... much, much, much more than most USians will ever make in their life, for four months work.

b) Because of my fiscal year manipulation, It's entirely possible that I'm not counting some money that was actually paid out in calendar year 2024, that would bring the actual payout much closer to the value stated in the article.

[0] I'm counting 100% of that signing bonus as paid up front because the only way he loses any of it is if he gets fired With Cause before he hits the six-month mark. If he got disabled on day #2 of his job and had to quit, he'd get 100% of the signing bonus.

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